Most Medicare confusion isn't about what plans cover — it's about the machinery underneath: networks, referrals, formularies, tiers, caps, and maximums. Those mechanics, not the brochure, determine what you actually pay in a year. Here's the machinery, explained plainly.
Networks: The First Question That Decides Everything
A network is the set of doctors, hospitals, and facilities that have contracted with your plan. On Medicare Advantage, the network is the boundary of your routine care:
- HMO plans: you use in-network providers, usually pick a primary care physician, and out-of-network routine care generally isn't covered at all. Lower copays are the trade.
- PPO plans: in-network care costs less; out-of-network care is still covered but at higher cost-sharing, and no referrals are needed. Flexibility is the trade.
On the other route — Original Medicare with a Medicare Supplement — there is no network. Any provider in the country that accepts Medicare accepts you.
Two facts about networks people learn the hard way: they can change every January, and a hospital being in-network doesn't guarantee every physician group inside it is. Verify the specific doctors, every fall.
Referrals and Prior Authorization: The Gatekeepers
Referrals apply mostly to HMO plans: your primary care doctor formally sends you to a specialist before the plan covers the visit. PPO plans generally skip this.
Prior authorization is different and broader: the plan must approve certain services — commonly advanced imaging, some procedures, skilled nursing stays, and specialty drugs — before agreeing to pay. Most Medicare Advantage enrollees are in plans that use prior authorization for some services. It isn't a denial machine (the large majority of requests are approved), but it is a process, and it's a real difference from Original Medicare, which doesn't use prior authorization for most services. When comparing plans, ask which of the services you actually use require it.
The Formulary and Its Tiers: Where Drug Costs Are Decided
Every plan covering drugs has a formulary — the covered-drug list — sorted into tiers: preferred generics cost the least, non-preferred brands more, specialty drugs the most. The same medication can sit on tier 2 in one plan and tier 4 in another, or carry step-therapy rules in one and none in another. This is why the only meaningful drug comparison runs your exact list through each plan — covered in depth on our Part D page.
The Donut Hole Is Dead. The Cap Is What Matters Now.
For years, Part D's "donut hole" coverage gap meant drug costs could spike mid-year, and truly expensive medication regimens had no ceiling at all. That design no longer exists. Since 2025, Part D has a hard annual out-of-pocket cap — $2,100 in 2026 <!-- 2026 FIGURE --> — covering your deductible, copays, and coinsurance for covered drugs. Hit the cap, and covered prescriptions cost $0 for the rest of the year. Covered insulin is separately capped at $35/month. And the Medicare Prescription Payment Plan can spread your costs into even monthly installments instead of front-loading them in the first months of the year.
If you — or a parent you help — avoided certain medications because of what the donut hole used to do, that math deserves a fresh look.
The Out-of-Pocket Maximum: Your Worst-Case Number
Every Medicare Advantage plan carries an annual maximum out-of-pocket (MOOP) for covered in-network medical care — capped by Medicare at $9,250 for 2026 <!-- 2026 FIGURE -->, and set lower by many plans. Reach it, and the plan pays 100% of covered in-network services for the rest of the year.
Here's the asymmetry worth understanding: Original Medicare by itself has no out-of-pocket maximum. Part B's 20% coinsurance runs uncapped — 20% of a very large number is a very large number. That's the entire reason the Medigap market exists: a Medicare Supplement plan absorbs that exposure in exchange for a monthly premium. So each route caps your risk differently — Medicare Advantage with a MOOP, Medigap with premiums that buy near-first-dollar coverage. Which structure fits you is the heart of the Advantage vs. Supplement decision.
Putting It Together: How to Read Any Plan in Five Numbers
When you strip a plan to its mechanics, five numbers tell you most of the story:
1. Premium — your fixed monthly cost (remember the Part B premium — $202.90 standard in 2026 <!-- 2026 FIGURE --> — rides along on every route).
2. MOOP — your worst-case year for medical care.
3. Your drugs' total cost on this formulary — at your pharmacy, your dosages, capped at $2,100 <!-- 2026 FIGURE -->.
4. Copays for the care you actually use — your specialists, your therapies, your imaging.
5. Network fit — a yes/no on every doctor you'd hate to lose.
Two plans with identical premiums can be hundreds of dollars a month apart on numbers 3 and 4. Comparing on premium alone is how people end up in the wrong plan.
Have an Agent Run the Mechanics for You
This comparison — networks, formularies, authorizations, five numbers across every carrier we represent in your county — is what MegaCare's licensed agents do in a single call, at no cost to you. Call 888-918-6920 (TTY: 711), Mon–Fri 9am–6pm EST.